Vetting Management Companies - Questions To Ask?

Question

I feel like this question has probably been asked/answered on here but I can't for the life of me figure out how to search the forums so I guess I'll just make a post myself!

My wife and I just closed on a lake home in Wisconsin and are looking to hire a management company. We're about 3 hours away and per the STR rules of the city the home is in we need to have a management company. I was planning on checking in w/ the big guys like Vacasa and Evolve. There's also a local one in the area I'm going to check into. What questions should I be asking these guys when vetting them? What are the keys to a good relationship w/ your management company? What can a management company do that sets them above and beyond all the rest?

Michael Smythe · Answer

@Michael PetersRecommend exploring as many sources as possible to get referrals AND cross-reference them to get as much accurate information as possible. Check out NARPM.com, BP’s Property Manager Finder (BiggerPockets: The Real Estate Investing Social Network), etc. Also, encourage you to learn from the mistakes of others - by reading posts here on BiggerPockets about owners not having their expectations met by their current Property Management Company. To avoid going through the same poor experience, keep reading. Even if someone gives you a referral here, do NOT make the mistake of assuming that the PMC will meet your expectations, just because they met the expectations of the referral source. In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING. It's often a case of not doing enough research, as they don't know what they don't know! Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – so, they often select the first PMC they call or that calls them back! So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed. EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do! This also leads owners to ASSUME simpler is better when it comes to management contracts. The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it! A well written management contract should clearly spell out what is expected of both the PMC and the owner, to PROTECT both and avoid misunderstandings. Why do you think purchase contracts are so long and have such small print? We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover. EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises! P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Andy Bahr · Answer

Hi Michael! Great Question!This is a very important topic as not all property management companies are the same. I have used a laundry list of questions, however, here are a few:-How many properties in the area, do you manage, for my same purpose (STR, LTR, MTR, etc)?-What is your process for evictions and/or non paying tenants?-How large is your maintenance team? Meaning how long should I expect to wait for routine repairs to be made?-Are you open to a bonus/penalty system, for the overall occupancy and financial performance of the property?-If we do more than 1 property together, do I receive a better property management fee?-What should my communication expectations be? Meaning, can I receive a weekly report of what is going on , as we will properties?-When you are out of town, who is your backup for coverage, for both maintenance and also general questions?

Andrew Syrios · Answer

This is a really good article that has a lot of questions to ask any potential property manager so I would start there: https://www.biggerpockets.com/blog/questions-to-ask-a-proper...

Bryant Xavier · Answer

Michael,First off, congrats on closing on the new rental. Hope everything goes well for you guys. I am a short term rental owner / operator and manage some properties for clients. I always recommend hiring local property managers over big management companies. I may be biased, but also have had various awful experiences renting from Vacasa especially, and once with evolve. Some questions I’d ask and get asked often1.) like others mentioned, a major question I’d ask is how many rentals they currently manage to see their current workload and see if they have the bandwidth to take on more properties. Another good question along the lines is how long they’ve been managing properties. Could always ask them to give them contact information of some other property owners they manage properties for and chat with their clients and see their strengths and weaknesses, etc. ** I’d ask for their Airbnb or VRBO profile link to review their reviews, years hosting, etc. to ensure it lines up with what they’re telling you*2.) with you guys being out of town, I’d make positive they have a team of maintenance guys for whenever something along the lines pop up. Something will pop up, and it’s important that they have team members to handle a majority of the repairs, and or have recommendations for local companies that can handle what you need3.) I’d get clear outline of what they cover and what they don’t cover. For example, we offer full service management but we don’t do STR taxes due to liability and complexity… but is always a good idea to make sure you guys are on the same page on what’s covered and what’s not to avoid any miscommunication. A huge key to a good relationship with your PM is vetting them properly, like you mentioned. “Trust but verify” is a great motto when it comes to PM’s in my opinion. Trust them and trust their work and their word, but when you can, verify it has been done and lines up with their word.I think something that sets PM’s above and beyond from others (especially in STR) is a group that is resourceful and has good local connections. Being in STR, there are all sorts of things that pop up and being resourceful and creative in problem solving is huge. You don’t want a PM that can’t do creative thinking and think outside the box, or else they’ll be texting and calling you every week with problems. Hope this helps!

Andrew Syrios · Answer

Glad to help, I hope it helps Michael

Collin Hays · Answer

I am a PM. If I was looking for a PM, I would ask the following:1. How many full time staff do you have per cabin, not including cleaners? We have 30 properties and two full time staff people. If you have one person managing 50 properties, you aren't going to get much service.2. What is your REAL commission? Are you marking up repairs and maintenance? Are you bartering my home 2 weeks a year, for "marketing purposes"? Are you charging booking fees that I don't get a share of? Are you charging me for linens? Do I pay for professional photography? What is the credit card merchant fee? 3. Can I get a list of homeowners that I can call?

Michael Peters · Answer

Awesome, just what I was looking for!

Andrew Steffens · Answer

Hey MichaelI am a PM with 65 units in FL, and will give you my 2 cents from that perspective:1. Avoid National/Very Large companies i.e. Vacasa/Evolve. Most of my clients started there and the horror stories are aplenty. I will never disparage a local competitor but I do not have a problem disparaging them.2. I would also recommend avoiding someone too small. If you like giving startups (less than 10 properties) a chance, know what you are getting into. Likely it will be 1 person or a small partnership where few people are wearing all hats. If they fail you will likely be stuck starting over from scratch.3. That sort of leaves more boutique, middle sized, local managers. I think that is the sweet spot. Big enough to have some staff and some marketing reach, local name recognition, battle tested, etc.4. Some questions I would ask:- How many units under management?- How many years of experience?- What platforms do you market on?- What is your PM Fee?- What are contract terms?- What other fees do you charge? (Both guest and owner - this is important.)Feel free to DM me if you have any questions. Good luck and congrats on your recent acquisition :)

Dina Schmid · Answer

If you plan to stay there, ask about the policies regarding owner stays. I found a PM that restricted the total number of days owners could stay. Another one I talked to requires owners to pay for housekeeping at the end of their stay and a third said you could save money by coming after a guest checks out and cleaning after them yourself. In addition to looking at their reviews, see who wins the SEO war if there are multiple PMs with direct booking sites.Google the lake name + cabin or rental house and see who pops to the top.One other question I like is "What makes you different?" Then decide if the answer is something you consider to be a good thing or not.

Nathan Gesner · Answer

Go for a local manager, not an online, discount company like Evolve or Vacasa.Try to interview several managers. Ask them all the same questions, allowing you to compare apples to apples. Cheaper doesn't mean better or that you'll keep more money in your pocket.